With the rise of the gig economy, non-employee compensation is becoming more frequent. The 1099 tax forms are used to report payments made to contractors and include a section on ‘Medical’ payments. However, not every medical transaction applies to the 1099 form.
Medical supplies are not 1099 reportable. Purchasing merchandise such as medical supplies does not warrant the return of information under section 6041. Therefore, you do not have to report them on your 1099 forms unless renting is involved.
Some medical items do need to be reported, but only if they are correlated with a provided service. The rest of this article will explain which medical payments are reportable and why most medical supplies do not fall under this category.
What Does 1099 Reportable Mean?
If an expense is 1099 reportable, it must be included on the 1099 tax forms required by the IRS. These records apply to non-employee payments only.
1099 tax forms include 1099-NEC, 1099-MISC, and 1099-K. These forms are filled in by individuals or businesses who have made a payment greater than $600. The payment must be made to another individual or business that is not considered an employee.
The payer must then send the filled-out form to the payee, who can then include it in their non-employment income.
These forms help the government better understand a taxpayer’s annual income. Appropriate tax brackets can then be applied.
Transactions that fall under the 1099 bracket could be conducted between various industries. Since one particular section calls for ‘medical’ payments, it makes sense to ponder whether the purchasing of medical supplies would qualify.
In the following paragraphs, I will explain which part of the 1099 forms is relevant and which transactions should be included.
Which Section Is Relevant to Medical Costs?
Firstly, not all 1099 forms are relevant to medical payments. According to the IRS, 1099 forms have recently been updated to meet the needs of an evolving gig economy. The 1099-MISC was once the only form used to report non-employee compensation. However, 1099-NEC has been introduced and is now the primary 1099 form.
The section under Box 6 is relevant to medical costs. The 1099-MISC is still used for miscellaneous business payments such as rent, attorneys, and medical services. Non-employee medical payments are only reported on the 1099-MISC form under Box 6.
Let’s take a look at Box 6 in further detail.
Box 6 on the 1099-MISC Tax Form
Each section of the 1099-MISC form is supplied to report business payments to applicable, mixed, non-employee services.
Box 6 of the 1099-MISC form requires the declaration of a business’s medical and health care payments.
These payments may be for services such as dentistry, injections, or health insurance programs. Sometimes, the acquisition of an item may fall under this category if said item requires a service. For example, injections are considered a service since you pay for the injection itself, plus a correlating service.
Why Aren’t Medical Supplies Included Under Box 6?
So, if items requiring service must be reported, shouldn’t medical supply, manufacture, and delivery be reported?
Medical supplies aren’t included under Box 6 of the 1099-MISC form because payments for merchandise, freight, storage, and “instrumentalities” are exempt from reporting. Medical supplies require all of those.
According to CFR section 1.6041-3(c), “Medical, Dental, Ophthalmic, and Hospital Equipment are not reportable.” This is because “Merchandise” and “Similar items” are not required to be reported under the Code of Federal Regulations (CFR).
What Should Be Included Under Box 6?
Now that you know medical supplies are not included, you may be wondering what it is.
Suppose your business has paid for services in the medical or health industries. In that case, you must then send that person a 1099 form with Box 6 filled out. However, this rule only applies if the payee is not on your employee payroll. The payment must also have been over $600.
Specific services fall under the Box 6 category.
According to the IRS, payments to the following list should be included under Box 6:
- Medical and health care services.
- Health Care and Insurers under specific programs.
- Corporations providing medical services.
- Items that have services such as dentures, injections, and drugs.
However, some services that would certainly qualify as medical are actually exempt. These include state-related organizations and agencies primarily.
According to the IRS, payments to the following list are exempt under Box 6:
- Tax-exempt hospitals
- Extended care facilities
- State services
- District of Columbia
- Political Subdivisions
What if the Medical Supplies Were Rented?
In the case of renting medical supplies, a service has been provided. Rented medical supplies must be reported under rental payments in the 1099-MISC form. This is separate from the medical section in Box 6.
In this scenario, the medical supplies themselves are not 1099 reportable. However, the rental transaction is.
Where Can I Find Information on 1099 Reportable Payments?
For more information on 1099 reportable payments, contact the Internal Revenue Service (IRS) directly. Understandably, the included payment scenarios can get confusing. The experts there can tell you what you want to know in detail.
The IRS is the national tax collection agency in the US. They are responsible for processing and administering your taxes. They also look after the production and monitoring of tax forms such as the 1099-NEC and 1099-MISC.
As they are the government body you are reporting to, they can provide the most up-to-date and reliable information on reporting.
You can visit their website for general information or their webpage for the latest guidance on 1099 forms.
The IRS can also be contacted about business queries via phone using the number 800-829-4933 from 7 AM to 7 PM in your local time.
Companies selling medical supplies are not categorized as providing a service. Instead, they provide merchandise. Box 6 on the 1099-MISC form requires the declaration of medical and health payments.
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- IRS: 16 CFR 1.6041-1 – Return of information as to payments of $600 or more.
- Cornell Law School: 26 CFR 1.6041-3 – Payments for which no return of information is required under section 6041
- Investopedia: 10 things you should know about the 1099s
- IOFM: Purchases of Medical Supplies
- IRS: About Form 1099
- IRS: How Can We Help You
- IRS: Instructions for Forms 1099-MISC and 1099-NEC (2020)
- IRS: Instructions for Forms 1099-MISC and 1099-NEC (Rev. January 2022)
- IRS: IRS Phone Numbers